TaxTMI 
TaxTMI 
2015 (1) TMI 468
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....s, certain loose sheets/documents were found and impounded, noticing certain investments including the investments in immovable properties. Based on the said findings, the following additions were made. a. Unexplained investment in purchase of land Rs. 68,89,250 b. Unexplained investment in purchase of land Rs. 2,21,50,000 c. Unexplained investment in construction of house Rs. 24,12,341 d. Unaccounted cash found Rs. 5,13,000 e. Unexplained investment/loans advanced Rs. 70,00,000 f. Undisclosed income Rs. 75,00,000 g. Disallowance of interest paid u/s.40a(ia) Rs. 21,11,274 3. Assessee preferred an appeal raising relevant grounds. Ld. CIT(A) in the appeal has deleted the additions made at Sl.No. (a), (d) to (f) and directed A.O. to examine (c) viz., unexplained investment in construction of house as the investments were explained by assessee through bank statements. Ld. CIT(A) confirmed the additions at item (b) and (g). Assessee is aggrieved and raised 13 grounds on these two issues. Revenue is aggrieved on deletion of addition at item (a) and direction with reference to item (c). ITA.No.354/Hyd/2013 : 4. In this appeal, assessee is contesting the confi....
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...., and if the version of Full Tank Level Zone is to be accepted and the registration effected as per SRO for a value of Rs. 60,56,000/- as correct, assessee should have shown the proof for the difference amount returned by the vendor. In view of the above, the AO concluded that the amount of Rs. 2,21,50,000/- mentioned in the page No. 151, represented the payments made to the land owner for purchase of land admeasuring 500 sq. yards at Kavuri Hills at the time of registration and accordingly the said amount has been treated as the unexplained investment made for purchase of property by assessee and was accordingly brought to tax. 6. Before the Ld. CIT(A) assessee made detailed submissions during the course of appellate proceedings, reiterating the facts put forth before the assessing officer. Assessee submitted the copy of the statement recorded from the vendor of plot, as an additional evidence wherein the vendor had accepted the consideration of Rs. 60,56,000/- only. An affidavit from the vendor Smt. A. Annapurna Reddy was also filed as additional evidence under rule 46A of the IT Rules. It was further argued that the notings on the loose sheet is not in the hand writing of ass....
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....y a sale deed dt. 28.6.2008, vide document No.4708/2008, with a sale consideration shown at Rs. 60,56,000/-. Based on the contents of the agreements of the sale (page No. 146 to 150 of annexure A/FDE/l ) and the corroborate evidence as found in the lose sheet of the impounded material (page 151 of A/FDE/01), with reference to the consideration reflected in sale deed dt. 28.6.2008, the AO has arrived at the conclusion that the amount of Rs. 2,21,50,000 represent the unexplained investment of appellant being the extra/ unaccounted sale consideration paid for acquiring the property under reference. In the process, the AO disbelieved the explanation of the appellant that though the agreement was reached for sale of property for a consideration as referred in the agreement for sale, it was renegotiated subsequently on the account of location of the plot in FTL zone where permissions would not be given for any construction. In this regard, the AO further observed that no such infirmity in the land was noticed and noted that appellant has constructed the commercial complex on the same property subsequently. The AO also relied on the ratio of decision of Hon'ble Supreme Court in the ca....
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....ed in Sec. 69B. The agreement for sale dt. 12.4.2008, constitute a primary evidence which indicate the actual sale consideration at Rs. 2,95,00,000/-, is further supported by the corroborative evidence of payment of a good portion of the consideration to the extent of Rs. 60,00,000/- by way of demand draft dt. 12.4.2008. The agreement for sale, though not signed by the vendors and the vendee indicate the other important ingredients of an evidence such as the details of the land/plot under transaction, such as the area of the plot the location of the plot and its genesis which were also incorporated in the sale deed executed subsequently on 28.6.2008, for sale of the same property signed by the same set of' vendors and vendees. The agreement for sale was in this case also clearly indicating the balance of the payments to be made to the extent of Rs. 2,21,50,000/- at the time of registration of the said land after reducing the amount of Rs. 74 lakhs paid in pursuance of the agreement for sale dt. 12.4.2008. Further corroboration of the evidence was indicated in the lose sheet impounded as page No.151 of A/FDE/01, indicating the payments of the balance of the amounts. The payment ....
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....ed by assessee for additional questions. While furnishing the reply for such questions the reply of assessee for question No.5 and 6 indicate as under: Answer to question No. 5 : " No property was purchased in my name for the asst. year 2009-10. I possess the following properties on my name: I House property bearing H .No.6-1-190-25/2, Padmarao Nagar, Secunderabad - 500 025 ii. Plot No. 170, Kavuri Hills, Hyderabad, on which a commercial complex is being built." Answer to question No. 6: "The investments made only for commercial complex at Kavuri Hills on plot No. 170, to a tune of Rs. 48,24,683/- during the financial year 2008-09 and 2009-10." Thus assessee indicates that commercial property was constructed on plot No. 170 at Kavuri Hills, which is nothing but the property under reference and the same fact indicate that there is no such infirmity as attributable to the said land. 7. 10 In this case, the appellant failed to adduce any cogent evidence to substantiate the reduction in purchase price from Rs. 2,95,50,000 as agreed in the agreement for sale dt. 12.4.2008, to Rs. 60,56,000 as recorded in the sale deed dt. 28.06.2008. The only reason given by the appell....
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....nce and accordingly the addition made on such basis is sustained. This ground of appeal is treated as dismissed." 8. Ld. Counsel referring to the order of Ld. CIT(A) submitted that the CIT(A) erred in considering the facts. His first argument was that Ld. CIT(A) was confused with the two properties assessee has dealt with. His submissions are that the plot No.170 which was subject matter of deal with Mrs. Y. Annapurna Reddy was different and this property was sold subsequently as explained before authorities. However, assessee and her husband has another property on which a house was constructed on which A.O. made addition of Rs. 24,12,341 each as unexplained. Therefore, Ld. CIT(A) observations in para 7.9 were not correct factually. Moreover, the statement extracted by Ld. CIT(A) with reference to Q.5 is not from either assessee or from Mr. Muralidhar Rao, her husband. The source of such statement was not known and assessee was not in a position to explain from where Ld. CIT(A) extracted the statement. Ld. Counsel then referred to the documents on record and explanations given to submit that Ld. CIT(A) accepted the explanation with reference to purchase of agricultural lands wh....
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....s subsequently sold was also not examined by authorities. In fact, subsequent sale was not before A.O. and Ld. CIT(A) got confused with another property while confirming the same. These contentions of assessee were unverified. 10.3. As far as the impounded sheet is concerned, the same represents FDE transactions. FDE is the abbreviation of assessee proprietary concern, Fair Deal Enterprise. In the statement on date of survey, assessee husband did not deny but stated that he would explain the transactions tomorrow (Q.No.24 on 03.11.2008), like the answer to many questions on transactions pertaining to FDE. A.O. did not examine whether the amount stated therein could be corroborated. The entries in document are as under : FDE 13.06.2008 5,00,000 16.06.2008 5,00,000 18.06.2008 5,00,000 20.06.2008 5,00,000 Total 20,00,000 Cash 1,50,000 Auditor 50,00,000 71,50,000 D/D to Dubai + 1,50,00,000 Interest 3,00,000 2,21,50,000 There are payments to an extent of Rs. 20,00,000 in June, 2008. Whether these payments pertain to business transactions or to the land could not be ascertained in the absence of any correlation. Even though the ....
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....yments and disallowed the claim of Rs. 21,11,274/- being the interest paid to M/s. India Bulls by applying the provisions of Sec. 40(a)(ia). 11.1. Assessee argued before Ld. CIT(A) on the ground that the interest was not paid separately since the payments were part of EMIs paid to M/s. India Bulls. As an alternative plea, assessee submitted that M/s. India Bulls is an Income-tax assessee and interests of Revenue were not jeopardized because of the non deduction of the tax by assessee. It was further submitted that the amounts of Rs. 21,11,274/- represent the payments actually made in the financial year 2008-09 hence, the provisions of Sec. 40(a)(ia) are not applicable since such provisions are only applicable to be situation where the amounts are still payable as on 31st of March of the financial year concerned. In this regard, assessee relied on the decision of Special Bench of !TAT, Visakhapatnam in ITA.No.477/Viz/2008,dt. 29.3.2012, to substantiate her claim. 11.2. Ld. CIT(A) dismissed the ground stating as under : "12.3. Perused the observations of the AO and the submissions of the appellant. As could be seen from the assessment order, the AO has briefly mentioned that....
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...., it can be held that the decision relied upon by assessee is not available to her case presently. Accordingly, it is held that the claim for deduction of Rs. 21,11,274/-, being the interest paid to India Bulls through EMI is disallowable as per the provisions of Sec. 40(a)(ia) and as such the order of the AO in disallowing the said amount is sustainable. Accordingly, this ground of appeal is treated as dismissed." 12. After considering the rival contentions, we are of the opinion that there is merit in assessee's contentions. First of all, A.O. has not established that the amount paid as EMI get covered by TDS provisions. Moreover, no proceedings u/s. 201(1) were initiated against assessee. Further, said India Bulls accounted the same as income, so following principle laid down by Hon'ble Supreme Court in the case of Hindustan Coco Cola vs. CIT 293 ITR 226 no further recovery could be made. Not only that on legal principles also, the addition could not be sustained. Even though the decision of ITAT Special Bench was stayed by Hon'ble A.P. High Court, the matter was considered by other High Courts. The Coordinate Bench in the case of DCIT vs. Ananda Marakala 150 I....
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....:-- "With a view to augment compliance of TDS provisions, it is proposed to extend the provisions of section 40(a)(i) to payments of interest, commission or brokerage, fees for professional services or fees for technical services to residents, and payments to a resident contractor or sub- contractor for carrying out any work (including supply of labour for carrying out any work), on which tax has not been deducted or after deduction, has not been paid before the expiry of the time prescribed under sub-section (1) of section 200 and in accordance with the other provisions of Chapter XVII-B. It is also proposed to provide that where in respect of payment of any sum, tax has been deducted under Chapter XVII-B or paid in any subsequent year, the sum of payment shall be allowed in computing the income of the previous year in which such tax has been paid. The proposed amendment will take effect from 1st day of April, 2005 and will, accordingly, apply in relation to the assessment year 2005- 2006 and subsequent years. [Clause 11]" Thereafter the Finance Act, 2008 made amendment to clause (a) in sub-clause (ia) in section 40 with retrospective effect from 1st April, 2005. The sect....
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....interest, commission or brokerage, rent, royalty, fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub-contractor, being resident, for carrying out any work (including supply of labour for carrying out any work), on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or; after deduction, has not been paid on or before the due date specified in sub-section (1) of section 139. Provided that where in respect of any such sum, tax has been deducted in any subsequent year, or has been deducted during the previous year but paid after the due date specified in sub-section (1) of section 139, such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid." 17. From the above provision as amended by the Finance Act, 2010 with retrospective effect from 1st April, 2010 it can be seen that the only difference which this amendment has made is dispensing with the earlier two categories of defaults as per the Finance Act, 2008, as discussed in the earlier para, causing disallowance on the basis of the period of the previous yea....
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.....f. 01.04.2010, is not remedial and curative in nature. 19. Prior to the decision of the Special Bench, identical issue had come up for consideration before the ITAT Kolkata Bench in the case of Virgin Creations v. ITO, IT Appeal No. 267/Kol/2009 for AY 05-06. The issue that arose for consideration was disallowance of expenses u/s.40(a)(ia) claimed as deduction while computing income from business being embroidery charges, dyeing charges, interest on loan and freight charges without deducting tax at source. The Embroidery charges were paid between 22nd may, 2004 to 30.11.2004. Tax had been deducted at source but were paid to the Government only on 28.10.2005 and not within the time contemplated by Section 200(1) of the Act. The dyeing charges were paid between 5.4.2004 to 20.8.2004. Tax was deducted at source but was paid to the Government only on 28.10.2005. Frieght outward charges were paid without deduction of tax at source. Interest on loans were credited to the creditors account on 31.3.2005 to the extent they were paid after the due date for filing return of income u/s. 139(1) of the Act, the disallowance was made u/s.40(a)(ia) of the Act. Before the Tribunal, the Assessee....
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....eated as retrospective in operation so that a reasonable interpretation can be given to the section as a whole. In the present case, the amount of tax deducted at source from the freight charges during the period 01/04/2005 to 28/02/2006 was paid by the Assessee in the month of July and August 2006 i.e., well before the due date of filing of its return of income for the year under consideration. This being the undisputed position, we hold that the disallowance made by the A.O. and confirmed by the learned CIT(A) on account of freight charges by invoking the provisions of Section 40(a)(ia) is not sustainable as per the amendments made in the said provisions by the Finance Act, 2010 which, being remedial/curative in nature, have retrospective application", we find no reason to deviate from the decisions of the ITAT's Mumbai Bench and Ahmedabad Bench, in the absence of a contrary view, except the other benches decisions or any other High Court. Therefore, respectfully following the decision of the Coordinate Benches (supra), we allow the ground nos. 1 to 3 of the assessee's appeal." 20. As against the aforesaid decision, the Revenue preferred appeal before the Hon'ble C....
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....on 40(a)(ia) as amended by Finance Act, 2012 is linked to Section 201 of the Act, in which proviso was inserted, it is necessary to look into those provisions which read thus: "Sec.201: (1) Where any person, including the principal officer of a company - (a) who is required to deduct any sum in accordance with the provisions of this Act; or (b) referred to in sub-section (1A) of Section 192, being an employer, does not deduct, or does not pay, or after so deducting fails to pay, the whole or any part of the tax, as required by or under this Act, then, such person, shall, without prejudice to any other consequences which he may incur, be deemed to be an assessee in default in respect of such tax: Provided that any person, including the principal officer of a company, who fails to deduct the whole or any part of the tax in accordance with the provisions of this Chapter on the sum paid to a resident or on the sum credited to the account of a resident shall not be deemed to be an assessee in default in respect of such tax if such resident - (i) has furnished his return of income under Section 139; (ii) has taken into account such sum for computing income in such retur....
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....5. The question is as to whether the amendment made as above is prospective or retrospective w.e.f. 1.4.2005 when the provisions of Sec.40(a)(ia) were introduced. Keeping in view the purpose behind the proviso inserted by the Finance Act, 2012 in section 40(a)(ia) of the Act, it can be said to be declaratory and curative in nature and therefore, should be given retrospective effect from 1st April, 2005, being the date from which sub-clause (ia) of section 40(a) was inserted by the Finance (No. 2) Act, 2004. In CIT v. Alom Extrusions Ltd. [2009] 319 ITR 306/185 Taxman 416 (SC), the Hon'ble Supreme Court had to deal with the question, whether omission (deletion) of the second proviso to s. 43B of the IT Act, 1961, by the Finance Act, 2003, operated w.e.f. 1st April, 2004, or whether it operated retrospectively w.e.f. 1st April, 1988? Prior to Finance Act, 2003, the second proviso to s. 43B of the IT Act, 1961 (for short, "the Act") restricted the deduction in respect of any sum payable by an employer by way of contribution to provident fund/superannuation fund or any other fund for the welfare of employees, unless it stood paid within the specified due date. According to the seco....
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....y as stated above, s. 43B (main section), which stood inserted by Finance Act, 1983, w.e.f. 1st April, 1984, expressly commences with a non obstante clause, the underlying object being to disallow deductions claimed merely by making a book entry based on mercantile system of accounting. At the same time, s. 43B (main section) made it mandatory for the Department to grant deduction in computing the income under s. 28 in the year in which tax, duty, cess, etc., is actually paid. However, Parliament took cognizance of the fact that accounting year of a company did not always tally with the due dates under the Provident Fund Act, Municipal Corporation Act (octroi) and other tax laws. Therefore, by way of first proviso, an incentive/relaxation was sought to be given in respect of tax, duty, cess or fee by explicitly stating that if such tax, duty, cess or fee is paid before the date of filing of the return under the IT Act (due date), the assessee(s) then would be entitled to deduction. However, this relaxation/incentive was restricted only to tax, duty, cess and fee. It did not apply to contributions to labour welfare funds. The reason appears to be that the employer(s) should not sit ....
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....omission in the section and which proviso is required to be read into the section to give the section a reasonable interpretation, it could be read retrospective in operation, particularly to give effect to the section as a whole. Accordingly, this Court, in Allied Motors (P.) Ltd. etc. (supra), held that the first proviso was curative in nature, hence, retrospective in operation w.e.f. 1st April, 1988. It is important to note once again that, by Finance Act, 2003, not only the second proviso is deleted but even the first proviso is sought to be amended by bringing about an uniformity in tax, duty, cess and fee on the one hand vis- a-vis contributions to welfare funds of employee(s) on the other. This is one more reason why we hold that the Finance Act, 2003, is retrospective in operation. Moreover, the judgment in Allied Motors (P) Ltd. etc. (supra) is delivered by a Bench of three learned Judges, which is binding on us. Accordingly, we hold that Finance Act, 2003, will operate retrospectively w.e.f. 1st April, 1988 (when the first proviso stood inserted). Lastly, we may point out the hardship and the invidious discrimination which would be caused to the assessee(s) if the content....
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....trospective and it would operate w.e.f. 1st April, 1988 (when the first proviso came to be inserted). For the above reasons, we find no merit in this batch of civil appeals filed by the Department which are hereby dismissed with no order as to costs.' 26. We are of the view that the reasoning of the Hon'ble Supreme Court in the case of Alom Extrusions Ltd. (supra) will equally to the amendment to Sec.40(a)(ia) of the Act whereby a second proviso was inserted in sub-clause (ia) of clause (a) of Section 40 by the Finance Act, 2012, w.e.f. 1-4-2013. The provisions are intended to remove hardship. It was argued on behalf of the revenue that the existing provisions allow deduction in the year of payment and to that extent there is no hardship. We are of the view that the hardship in such an event would be taxing an Assessee on a higher income in one year and taxing him on lower income in a subsequent year. To the extent the Assessee is made to pay tax on a higher income in one year, there would still be hardship. 27. As far as the appeal of the revenue is concerned, we find that the use of word "Payable", in Section 40(a)(ia) of the Act has created controversy as to whethe....
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....le at source but such tax has not been deducted or if deducted not paid before the due date. The provision nowhere requires that the amount which is payable must remain so payable throughout during the year. If the assessee's interpretation is accepted, it would lead to a situation where the assessee who though was required to deduct the tax at source but no such deduction was made or more flagrantly deduction though made is not paid to the Government, would escape the consequence only because the amount was already paid over before the end of the year in contrast to another assessee who would otherwise be in similar situation but in whose case the amount remained payable till the end of the year. There is no logic why the legislature would have desired to bring about such irreconcilable and diverse consequences. Secondly, the principle of deliberate or conscious omission is applied mainly when an existing provision is amended and a change is brought about. The Special Bench was wrong in comparing the language used in the draft bill to that used in the final enactment to assign a particular meaning to s. 40(a)(ia). Accordingly, Merilyn Shipping does not lay down correct law. Th....
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....n the issue, one in favour of the assessee expressed by the Hon'ble Allahabad High Court and the other against the assessee expressed by the Hon'ble Gujarat & Calcutta High Courts. Admittedly, there is no decision rendered by the jurisdictional High Court on this issue. In the given circumstances, following the decision of the Hon'ble Supreme Court in the case of Vegetable Products Ltd. (supra), we hold that where two views are possible on an issue, the view in favour of the assessee has to be preferred. Following the decision of the Hon'ble Allahabad High Court, we uphold the order of the CIT(A)." 12.1. Respectfully following the same, we hold the issue in favour of assessee. A.O. is directed to delete the addition. Grounds are allowed. 13. In the result, assessee's appeal is allowed for statistical purposes. ITA.No.428/Hyd/2013 : 14. Revenue has raised the following grounds on two issues as under : 2. "The Ld. CIT(A) ought to have appreciated the fact that it is the assessee who has to discharge the initial onus of proving with corroborative evidences that the lands were situated at FTL zone and hence, the agreed price has not been materialized,....
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....ntiate the claim. Hence, the assessing officer relying on the decision of Hon'ble Supreme Court in the case of CIT Vs. Durga Prasad More (82 ITR 540) proceeded to assess the amount of Rs. 68,89,250/- being the differential amounts as per agreement for sale dt. 12.04.2008 (Rs.1,31,51,250) and sale deeds dt.15.09.2008 (Rs.62,62,000/-), as unexplained investment in the hands of assessee. 16. Ld. CIT(A) after admitting additional evidence and getting remand reports from A.O. has allowed the assessee contentions by stating as under : "6.4. Perused the observations of the assessing officer along with the submissions of the appellant. As could be seen from the facts of the case, the appellant Mrs. M. Sailaja, along with one Mrs. Ch. Sandhya purchased the agricultural lands located at Yedulanagulapally and Kollur Villages, for a consideration of Rs. 62,62,500/- vide the two sale deeds dt. 15.09.2008. However, the AO quantified the actual sale consideration to be Rs. 1,31,51,250/- as per the amounts mentioned in the three separate agreements for sale, shown to have been entered on 12.4.2008 with the three parties i.e. Mr. B. Ramulu Goud , Mr. B. Lakshminaraya Goud and Mr. Venkates....
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....ough cheques or DDs to indicate the absence of corroborative evidence if any. The ratio of the decision relied upon by the AO indeed indicates that the taxing authorities entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents. However, no such surrounding circumstances were neither found nor brought on the record by the AO. In this case the documents relied upon by the AO are neither executed nor signed and the sale deed relied upon by the appellant was rejected without bringing in any corroborative evidence, either found during the survey proceedings or collected in the subsequent proceedings, on the record. Further, the vendors, who were examined by the authorities concerned did not confirm the receipt of the higher amounts as envisaged by the AO, based on the recitals in agreements for sale. Thus, in the absence of any corroborative evidence, the unsigned agreement for sale alone may not convey the information, other than what has been incorporated in a registered document. 6.7. Further, the amount of consideration which was treated as unexplained investments in the hands of the appellant, as against assessability o....
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....t satisfactory. Further, the onus of proving presence of all the circumstances lies with the department. In the present case, there is no corroborative evidence to prove that the real consideration paid is Rs. 1,31,51,250/- except the unsigned agreements of sale dt.12.4.2008. Further, neither the payments were made by demand drafts/cheques, nor the receipts for payments for cash were available with the A.O. to prove that the consideration paid is more than Rs. 68,89,250/- as indicated in the sale deed dated 15.08.2008. Further, the main reason attributed by the appellant for renegotiation of the price i.e., the location of the lands in FTL Zone of the local ponds was failed to be rebutted. Thus, it can be held that the cumulative conditions/circumstances were absent to bring the amounts based on the primary evidences such as unsigned agreements for sale, into the ambit of unexplained investments. Further, as discussed, the entire consideration is not relatable to the appellant alone where the name of Mrs Sandhya was mentioned as the coowner in the sale deed. Under the circumstances, I am of the considered opinion that the addition of Rs. 68,89,250/- made on account of treating t....
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.... investment was not explained with reference to the sources and with the help of the books of account. As per the assessing officer, certain notings were found in the impounded material (Page No.1 to 10 of Annexure A/FDE/05), indicating certain amounts written against various names, pointing out to the payments made towards the investment in property at Kavuri Hills and during the assessment proceedings assessees failed to explain the sources of the same except saying that the said investments are duly accounted in the financial year 2008- 09 and were met out of the withdrawals made from M/s. Fair Deal Enterprises (proprietrix - M. Sailaja) and M/s. Sri Krishna Surgicals (Proprietor Mr. M. Muralidhar Rao). In the absence of clear explanations as regards to the sources of the investment, specially with reference to the books of account, the AO treated the amounts of Rs. 48,24,683 invested during the financial year 2008-09, as unexplained investment and 50% of such investments were treated as unexplained investments in the hands of assessee. 19. Before the Ld. CIT(A), assessee furnished additional evidence and the same was sent to A.O. on remand. A.O. made various submissions afte....